Economic and financial experts say it is uncertain that the latest policy action on foreign exchange introduced by the Central Bank of Nigeria will work.
The CBN had on Monday announced a new policy decision aimed at boosting forex supply to end-users in order to ease the pressure at the parallel market.
Economists said the policy measure might not address the underlying problems affecting the forex market and the economy in general.
The experts spoke in separate interviews with our correspondent on Wednesday.
The Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, said, “The CBN’s new forex action is not a new policy per se; it is an extension of the existing policy. The CBN is trying to improve forex supply in the official market to end-users in order to reduce pressure at the parallel market.
“This will in turn narrow the gap between the official and parallel market rates. It is good but I doubt if they can sustain it. We are not also sure if this will address the underlying challenges.”
A professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, opposed the policy action, saying it would drain the country’s external reserves and worsen the exchange rate challenges facing the country.
He said, “It is unfortunate that the CBN has allowed itself to be forced into this type of decision. This decision is not a palliative measure because it will create serious problem for the CBN. This measure will drain again the external reserves that have been growing in recent times. Some Nigerians including the banks will use this opportunity to collect the dollars from the CBN and sell it at the black market.
“Again, looters will use the naira they have been keeping at home to buy more dollars. I have said it in November last year that the CBN needs to change higher denominations (N1000 and N500 notes) of the naira and give only six weeks for people to bring the money they have to change it.”
A market research expert at FXTM, a forex brokerage firm, Mr. Lukman Otunuga, said, “The naira was exposed to further losses on Tuesday with prices sinking to 520/dollar on the parallel exchange as investor’s re-evaluated the new CBN forex policy.
He said, “With the dollar demand for school fee payments overseas and personal travel allowance enforcing downside pressures on the parallel market, the move by the CBN to sell dollars to retail users via commercial lenders seems logical. While the policy may create some transparency, liquidity and efficiency in the Nigerian FX markets, this does not solve the overriding problem of multiple exchanges.”